Can I Reduce My Car Loan Repayments?

Circumstances change, and it can be, understandably, terribly stressful if your income drops after you've begun a new car finance agreement. With growing living costs, you may want to look into ways to minimise your monthly auto financing payments and make them more bearable.

There are several reasons why you would want to reduce your car loan payments. It might be because you're trying to keep up with your spending in the face of escalating living costs. You are not alone; lots of people in the UK have been having trouble managing their loan payments.

Can you minimise monthly car loan repayments once your arrangement begins? How can you find vehicle loans with cheap monthly payments? We'll be looking into ways to save on car financing costs, such as low-interest loans and the best car finance deals.

How To Lower Car Loan Payments

There are a few things you can attempt in order to lower your car finance payments, but not all of these suggestions will apply to your credit arrangement. To determine what works best for you, firstly speak with your finance provider and review the terms and circumstances of your contract. You might be able to negotiate a lower interest rate or even extend the term of your loan. 

When researching how to minimise your car loan payments, our first point of guidance is to go with a fixed-interest loan  Most  car loans are fixed interest these days, but there are a few which are not, so do check this out carefully. Foxed interest  loans will ensure consistent monthly payments, and you will not have to experience any sudden increases in your monthly instalments.

However, a fixed-sum loan may not be suitable for your situation, so you must also assess what best meets your needs and expectations. We would advise you to also look at the interest rates for these forms of loans. Check rates for both types of loans to be confident in your decision, but be aware of the current financial markets and the predictions for interest increases or decreases.  

All About Low Interest Rates

The next thing to look out for is interest rates. Lower interest rates mean cheaper monthly payments, as well as a reduced overall cost of ownership. Look at APR on car finance deals if you want to get an idea of the interest rate plus any extra charges - this will give you a full picture of the cost of the loan and is a great comparison tool as all lender calculate this APR figure in the same way.  

You might be wondering how to negotiate a lower interest rate on a car loan or how to get a lower APR on a car loan. Of course shopping around is key - and the better your credit score, the better deals you will be able to secure. It's a good idea to check out your credit score (you can do this for free) and that will give you an idea of what to expect. 

You will likely see that rates are labelled as 'representative' when you see them advertised. This implies that the lender is legally obliged to offer this rate to at least 51% of applicants. The remaining 49% may be required to pay extra. To account for this, you should carefully examine any loan provided to you, particularly the real interest rate that ends up being charged.

Can I Lower My Interest Rate On My Car Loan? 

You may believe that purchasing a more expensive vehicle will cost you more, or that putting down a large deposit will cost you less. Lenders often impose lower interest rates for people borrowing higher amounts, so this might be more complicated than it seems.

You'll pay your car finance over a certain length of time (typically 12 months to 5 years), and this will influence the size of your monthly instalments. If you stretch your spending over a longer length of time, your monthly payments will decrease.

However talk to your lender about how this will play out according to your car finance agreement, since changing the loan term may result in higher interest rates.

Voluntary Termination of Your Car Loan

If you're having trouble paying your car finance instalments or just want to terminate your agreement early and start over with a new car, you may want to consider voluntary termination.

You have the legal right to end your car finance agreement early if you have paid off at least half of the total amount due on your contract under the Consumer Credit Act of 1974. If you haven't paid over 50% yet, you'll normally be given the opportunity to pay the difference.

If your car finance plan is a Personal Contract Purchase (PCP), this figure will also contain the balloon payment. 

If you can't afford your car finance repayments and are currently behind on your monthly instalments, you will not be able to use voluntary termination. As a result, as soon as you realise you can no longer afford your payments, you should initiate the voluntary termination process. Don't wait until you're already behind on your payments. 

What if you've already fallen behind on your payments? You are required to return the car to the car finance provider in this situation, but you would still have to pay the remaining balance. If you are already in financial trouble, this is probably not a favourable scenario. The sooner you begin the procedure, the better off you will be.

Refinance Your Car Loan And Lower Payments

If you have an existing loan, refinancing to decrease interest rates and monthly payments is one way trying to minimise costs. You can dramatically reduce the amount you pay monthly by getting a lower the interest rate on your new loan.

For example, if your credit score has improved since you first took out your loan, you might be able to negotiate a new loan with a lower interest rate. This could potentially save you a great deal of money over the course of the loan.  But even if that is not possible, you might be able to extend the term of the loan over a longer period to reduce your monthly payments and make it more manageable. 

However if you go for this option, it's important to examine the real full cost of the loan, as you will be paying interest over a longer period. But you might still go for this, in order to manage your payments without default and keep your car. 


Many people are worried about the increased cost of living and the increase in interest rates, and thinking how they can cope with their car repayments too. But if you are now looking for a new loan, before you agree to any loan, look around and research rates to find the cheapest price for your specific circumstances. Comparison websites can be useful, but you should also run some Google searches.

Carmoola provides a simple and straightforward approach to obtaining car finance, putting you in charge. Use our calculator to see instantly how much you might spend monthly if you finance your next car via Carmoola.

Shopping around, checking your credit score, refinancing, and, of course, using Carmoola are all possible options for lowering your car costs. And if you're looking to refinance, Carmoola has some great refinancing deals too! 😊